Asian stocks fell ahead of a long list of corporate results on Thursday that may shed light on the year's earnings outlook, though the region continued to outperform Wall Street in July.

The increasing possibility of a U.S. credit rating downgrade, with Washington still not close to sealing a deal to lift the U.S. debt ceiling, loomed over equity markets and was a factor in knocking the S&P 500 index down 2 percent overnight.

By comparison, Japan's Nikkei share average was down 1.1 percent in early trade. Clothing chain company Fast Retailing , whose stock hit a 13-month high on Wednesday, was off 1.7 percent.

Hitachi Construction Machinery , a subsidiary of Hitachi Ltd -- Japan's largest industrial electronics company, saw its shares jump 4.5 percent after posting a 65 percent annual rise in April-June net profits.

Japan's biggest consumer electronics makers are expected to show quarterly earnings slumped due to the March earthquake, but investors will focus on whether these companies can meet their forecasts for a swift recovery, given a fragile global economy.

"Buying on dips in companies with good earnings may continue, but exporters may not fare well for the time being as long as there are concerns about the U.S. economy," said Hideyuki Okoshi, general manager at Chibagin Securities in Tokyo.

The MSCI index of Asia Pacific stocks outside Japan was down 1 percent, with technology, commodity-related and consumer shares the biggest drags.

The index is up 1 percent so far in July compared with a 0.9 percent fall in the MSCI all-country world index and a 1.2 percent decline in the S&P 500.

The Australian dollar has been an attraction for investors in currency markets looking for opportunities in the midst of debt crises in the United States and the euro zone.

The currency was up 0.2 percent at $1.1040 and not far from a post-float high of $1.1081 on Wednesday after Australian inflation data.

The U.S. dollar index, which tracks its value against major currencies, was barely changed on the day though has fallen 3.4 percent since hitting a four-month two weeks ago.

Gold has also been a big winner as investors seek out hard assets to hedge against risks. Gold rose 0.1 percent to $1,615 an ounce after hitting an all-time high of $1,628 on Wednesday. (Additional reporting by Ayai Tomisawa in TOKYO; Editing by Richard Borsuk)

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